Novellus Sales Slump on 'Anemic' Demand
Tuesday October 15, 7:15 pm ET
By Reed Stevenson
SEATTLE (Reuters) - "Anemic demand" depressed revenue at Novellus Systems Inc. (NasdaqNM:NVLS - News) in the third quarter amid a slumping semiconductor industry that has shown few signs of recovery, the chip equipment maker said on Tuesday.
Shares in Novellus, which were already falling in after-hours trade, went into a nosedive after Intel Corp. (NasdaqNM:INTC - News) -- a key customer -- said it would pare back spending on equipment. Novellus shares slumped to $23.50 from its Nasdaq close of $26.13, erasing Tuesday's gains in regular trading.
The San Jose, California-based maker of semiconductor production equipment said it earned a net profit of $4.1 million, or 3 cents a share, in the quarter ended Sept. 28 compared with a year-ago loss of $14 million, or 10 cents a share, a year ago.
Novellus said it earned $16.11 million, or 11 cents a share, excluding the impact of debt retirement as well as a tax gain. That was at the top end of expectations for a profit in the range of 6 cents to 11 cents a share, with an average estimate of 9 cents, according to a poll of 19 analysts by market tracker Thomson First Call.
But spending cutbacks by semiconductor makers, particularly in Asia, which are seeing sluggish demand for chip-hungry items like computers and mobile phones, are weighing on orders.
Third-quarter net sales fell to $230.5 million in the third quarter from $303.7 million a year earlier.
"The weak macroeconomic conditions and anemic demand have had a negative impact on our business in the second half of the year," Chairman and Chief Executive Richard Hill said in a statement.
However, Hill said, "Despite the economic malaise and resulting slowdown in demand from our customers, we remain committed to profitability and more importantly, generating cash from operations."
Hill said orders totaled $202.4 million in the September quarter. Novellus had warned in late August that orders could be as low as $200 million instead of its earlier guidance of $250 million.
Intel, which also announced September-quarter results on Tuesday showing a rise in net income but drop in revenue year on year, said it will reduce slightly their spending on chip equipment in fourth quarter by reusing some equipment.
"That's nothing new at Intel," Hill told a conference call, speaking from Tokyo, adding that it underscored the ability of Novellus' equipment to span several generations of chip products.
Prudential Securities analyst Shekhar Pramanick said Intel was the main reason for the negative sentiment on Novellus' shares. Pramanick said a weak third quarter, along with cost saving efforts, were making it more likely for fourth-quarter results to hit a bottom and set the stage for a recovery next year.
"The cost savings from head count reductions is going to put them in a nice position in the fourth quarter," Pramanick said, "All in all, things are slightly better than expected. We are looking for orders to start improving in the first half of 2003."
Hill said plans to acquire SpeedFam-IPEC Inc. will strengthen Novellus' position in providing equipment to work with copper in semiconductor fabrication. |
